Downsizing is booming

Smaller homes trendy again as baby boomers look to shed excess room and recession makes large homes too costly.Goodbye, McMansion. Hello, bungalow, condo or suburban split-level.

The Great Recession may be over, but many people’s lifestyles will never be the same. They are saving more, spending less, simplifying their lives and — increasingly — downsizing their homes.

This trend, which began with the economic downturn but has dovetailed with demographic changes, has given way to a trickle-down effect for local businesses offering services to live gracefully in tight surroundings.

There are benefits to letting go of those supersized showpieces, from the lower upfront cost to smaller electric bills and less yardwork.

Median home size has dropped 6 percent since 2007, in large part because cash-strapped Americans can’t afford to buy, heat or maintain larger homes, according to the National Association of Home Builders.

But people are still investing money in making their homes as comfortable as they can be. The trend means work for organizers, interior designers, home-furnishings stores, carpenters with tricks to maximize shelf space and, of course, self-storage businesses for those who can’t bring themselves to part with their 1980s designer clothes or collection of African masks.

Stephen Melman, director of economic services for the National Association of Home Builders in Washington, D.C., said that home size appeared to peak during the building boom. Since then, the trend toward smaller homes seems to be lasting longer than in previous recessions. The median floor area of new homes dropped from 2,309 square feet in the first quarter of 2007 to 2,169 square feet in the second quarter of 2010, according to the group’s analysis of Census data.

In the organization’s most recent survey, 95 percent of homebuilders said they were building smaller and less-expensive homes than in the past because that’s what consumers want.

Melman said the U.S. consumer consistently cites affordability and operating costs — mainly energy — when asked about concerns in buying a home. Small homes cost less to heat and cool.

Demographic changes play a role. As baby boomers age, they are transitioning to smaller homes that need less upkeep. Other factors in downsizing include the difficulty of qualifying for a large mortgage and the fact that many people have smaller amounts of equity in existing homes to roll into a new home.

Adding to the trend, there is a crop of first-time homebuyer, lured to the market by tax credits, who are seeking affordable small homes, he said.

This article applies perfectly to buyers searching for homes in Studio City, Sherman Oaks, Westwood, Cheviot Hills etc, where an average 3 bedroom home could run you anywhere from $500K in the San Fernando Valley and anywhere from $800k on the Westside.